Unit 4: Market Segmentation, Targeting, and Positioning

Fifth Semester Hospitality marketing and sales Notes
Markets:

A market refers to a place, physical or virtual, where buyers and sellers come together to exchange goods, services, or financial instruments. The purpose of a market is to facilitate transactions between buyers and sellers, and to provide a mechanism for prices to be determined based on supply and demand.

Markets can be categorized based on the type of goods or services being exchanged. For example, there are markets for consumer goods, financial instruments, real estate, and labor. Within each market, there may be sub-segments, such as specific industries or segments of the population.

In the hospitality industry, the market refers to the overall demand for various types of hospitality services, such as hotels, restaurants, and travel. Hospitality businesses must understand the market in which they operate and continuously adapt their offerings to meet the changing needs and preferences of consumers. This may involve analyzing consumer behavior, monitoring competitors, and monitoring economic and cultural trends.

Market Segmentation

Market segmentation is the process of dividing a market into smaller groups of consumers with similar needs or characteristics, in order to better understand and meet their specific needs. By segmenting a market, a business can tailor its marketing strategies and offerings to better meet the needs of specific consumer groups.

There are various ways to segment a market, including:

  1. Demographic segmentation: Dividing the market based on demographic factors such as age, gender, income, education, and occupation.

  2. Geographic segmentation: Dividing the market based on geographic factors such as region, climate, and population density.

  3. Psychographic segmentation: Dividing the market based on psychological factors such as personality, values, attitudes, and lifestyle.

  4. Behavioral segmentation: Dividing the market based on consumer behavior, such as purchase behavior, usage rate, and brand loyalty.

  5. Benefit segmentation: Dividing the market based on the benefits consumers seek from a product or service.

In the hospitality industry, market segmentation can be used to better understand the specific needs and preferences of different consumer groups, such as business travelers, families, and solo travelers. By segmenting the market, hospitality businesses can tailor their offerings and marketing strategies to better meet the needs of these specific consumer groups, and increase their competitiveness and profitability.

Market Targeting:

Market targeting is the process of evaluating different market segments and choosing one or more segments to serve. It involves analyzing each segment’s potential, and selecting the segments that the business can best serve and that offer the greatest potential for profit.

Once a market has been segmented, a business can use several methods to evaluate the segments and select its target market, including:

  1. Market size and growth: The size and growth potential of a segment can indicate the potential for sales and profitability.

  2. Consumer needs and preferences: The needs and preferences of the segment can indicate whether the business’s offerings will be well-received.

  3. Competition: The level of competition in a segment can indicate the potential for profit and the resources that will be required to succeed.

  4. Cost structure: The cost of serving a segment, including the cost of production, marketing, and distribution, can impact the potential for profit.

Once a target market has been selected, a business can tailor its offerings and marketing strategies to best meet the needs of the target market. This can result in increased competitiveness, profitability, and customer loyalty.

In the hospitality industry, market targeting is crucial for success. Hospitality businesses must understand the specific needs and preferences of their target market and tailor their offerings and marketing strategies to best meet those needs. This may involve providing unique or personalized experiences, offering specific amenities, or targeting specific customer segments, such as business travelers or families.

Selecting a Market Segments

Selecting a market segment involves evaluating different segments and choosing one or more segments to serve. The following steps can be used to select a market segment:

  1. Identify the segments: Start by identifying the segments in the market using segmentation techniques such as demographic, geographic, psychographic, behavioral, and benefit segmentation.

  2. Evaluate each segment: For each segment, gather information on the segment’s size and growth potential, consumer needs and preferences, competition, and cost structure.

  3. Select the target segment: Based on the information gathered in step 2, select the segment that offers the greatest potential for profitability and growth, and that the business can best serve.

  4. Assess the target segment’s feasibility: Assess the feasibility of serving the target segment by evaluating the resources, capabilities, and competencies that will be required to succeed.

  5. Refine the segmentation strategy: Based on the results of the feasibility assessment, refine the segmentation strategy as needed to ensure that the target segment can be effectively served.

It’s important to note that a business may choose to target multiple segments if it has the resources and capabilities to do so. In the hospitality industry, a business may choose to target multiple segments, such as business travelers, families, and solo travelers, by offering different types of accommodations, amenities, and services to meet the specific needs of each segment.

 
Choosing a Market-Coverage Strategy

Once a market segment has been selected, a business must choose a market-coverage strategy to effectively serve the target segment. There are several market-coverage strategies, including:

  1. Undifferentiated Marketing (Mass Marketing): This strategy involves treating the entire market as a single entity and offering a single product or service to all consumers in the market.

  2. Differentiated Marketing: This strategy involves offering different products or services to different segments in the market.

  3. Concentrated Marketing (Niche Marketing): This strategy involves focusing on a single, specific segment of the market and offering a product or service tailored to that segment’s needs.

The choice of market-coverage strategy will depend on various factors, including the size and growth potential of the target segment, the level of competition, the resources and capabilities of the business, and the overall marketing objectives.

In the hospitality industry, a business may choose a differentiated or concentrated marketing strategy, depending on the target market and the resources and capabilities of the business. For example, a luxury hotel chain may choose to target business travelers and families with different offerings, while a budget hotel chain may choose to target budget-conscious travelers with a concentrated marketing strategy. The choice of market-coverage strategy will depend on the specific needs and preferences of the target market, as well as the resources and capabilities of the business.

Market Positioning

Market positioning refers to the process of creating a unique image for a product or service in the mind of the target customer. It involves developing a distinctive and appealing value proposition that sets the product or service apart from its competitors and makes it attractive to the target customer.

The following steps can be used to position a product or service in the market:

  1. Identify the target market: Start by defining the target market and understanding the needs, preferences, and behaviors of the target customer.

  2. Evaluate the competition: Analyze the offerings of the competitors in the market and understand their strengths and weaknesses.

  3. Develop a unique value proposition: Based on the information gathered in steps 1 and 2, develop a unique value proposition that sets the product or service apart from its competitors and appeals to the target customer.

  4. Communicate the value proposition: Communicate the value proposition to the target customer through marketing campaigns, product design, and customer interactions.

  5. Continuously evaluate and refine: Continuously evaluate the effectiveness of the market positioning and make changes as needed to stay ahead of the competition and meet the evolving needs of the target customer.

In the hospitality industry, market positioning is crucial for success. A hotel, for example, may position itself as a luxury hotel by offering high-end accommodations, amenities, and services, and by targeting upscale customers who are willing to pay a premium for a premium experience. Alternatively, a hotel may position itself as a budget-friendly hotel by offering budget-friendly accommodations, amenities, and services, and by targeting budget-conscious customers who are looking for a value-for-money experience.

Positioning Strategies

Positioning strategies are techniques used to differentiate a product or service from its competitors and to create a unique image in the mind of the target customer. There are several positioning strategies, including:

  1. Price Positioning: This strategy involves positioning a product or service as the least expensive or the most premium offering in the market.

  2. Quality Positioning: This strategy involves positioning a product or service as the highest quality offering in the market.

  3. Feature Positioning: This strategy involves positioning a product or service as having unique features or benefits that set it apart from its competitors.

  4. Benefit Positioning: This strategy involves positioning a product or service based on the specific benefits it provides to the customer.

  5. Competitor Positioning: This strategy involves positioning a product or service in relation to the offerings of a specific competitor in the market.

  6. User Positioning: This strategy involves positioning a product or service based on the specific needs and preferences of a particular user group.

Choosing and Implementing a Positioning Strategy

Choosing and implementing a positioning strategy involves several steps:

  1. Conduct market research: Start by conducting market research to understand the target customer and the competitive landscape. This information will be used to inform the choice of positioning strategy.

  2. Identify unique selling proposition: Based on the information gathered in the market research, identify the unique selling proposition (USP) that sets the product or service apart from its competitors and appeals to the target customer.

  3. Choose a positioning strategy: Based on the USP, choose a positioning strategy that aligns with the marketing objectives and resonates with the target customer.

  4. Develop a positioning statement: Develop a clear and concise positioning statement that summarizes the USP and the chosen positioning strategy.

  5. Implement the positioning strategy: Implement the positioning strategy through marketing communications, product design, and customer interactions.

  6. Monitor and evaluate: Continuously monitor and evaluate the effectiveness of the positioning strategy and make adjustments as needed to stay ahead of the competition and meet the evolving needs of the target customer.

Positioning Measurement

Positioning measurement involves evaluating the effectiveness of the positioning strategy in creating a unique image in the mind of the target customer. Perceptual mapping and product differentiation are two methods used to measure and evaluate the positioning of a product or service in the market.

  1. Perceptual Mapping: Perceptual mapping is a visual representation of how the target customer perceives a product or service in relation to its competitors. This is achieved by plotting the product or service and its competitors on a graph based on specific attributes or characteristics, such as price, quality, or brand image. Perceptual mapping helps to identify gaps in the market and to understand how the target customer perceives the product or service in comparison to its competitors.

  2. Product Differentiation: Product differentiation refers to the process of creating a unique image for a product or service in the mind of the target customer. Product differentiation can be achieved through the use of unique features, design, packaging, or brand image. Product differentiation helps to create a competitive advantage for the product or service and sets it apart from its competitors.

In the hospitality industry, a hotel may use perceptual mapping to understand how its target customers perceive it in comparison to its competitors. The hotel may also use product differentiation to create a unique image in the mind of the target customer and to stand out in a crowded market. For example, a luxury hotel may differentiate itself from its competitors by offering high-end amenities and services, such as a spa, fine dining, and concierge services. This differentiation helps to create a competitive advantage and appeals to the target customer seeking a luxury experience.

Selecting the Right Competitive Advantages

Choosing the right competitive advantages is crucial to the success of a business. Here are some steps to help you select the right competitive advantages:

  1. Identify your target market: Understanding your target market and their needs is essential to selecting the right competitive advantages.

  2. Analyze your competitors: Study your competitors and their strengths and weaknesses to identify potential areas where you can differentiate yourself.

  3. Evaluate your resources: Consider the resources you have available, such as your skills, technology, and assets, and determine how they can give you a competitive edge.

  4. Determine your unique selling proposition: Identify what sets your business apart from others and what makes your products or services unique.

  5. Focus on your strengths: Prioritize your strengths and focus on them to create a competitive advantage.

  6. Look for untapped opportunities: Identify untapped market segments or opportunities where you can offer a solution that no one else is providing.

  7. Choose the right mix of advantages: Select a mix of advantages that cater to the needs of your target market and set you apart from your competitors.

Remember, choosing the right competitive advantages requires ongoing monitoring and adaptation, as market conditions and customer needs can change over time.

Communicating and Delivering the Chosen Position

Once you have selected your competitive advantages, the next step is to effectively communicate and deliver them to your target market. Here are some tips to help you do this:

  1. Clearly articulate your position: Clearly communicate your unique selling proposition and the value you offer to your target market.

  2. Use the right channels: Choose the channels that best reach your target market, such as social media, advertising, direct mail, or in-person events.

  3. Emphasize your advantages: Highlight the features and benefits of your products or services that give you a competitive edge.

  4. Provide proof: Use case studies, testimonials, and other forms of social proof to demonstrate the effectiveness of your competitive advantages.

  5. Build brand awareness: Build brand awareness through consistent messaging and marketing efforts.

  6. Create a memorable experience: Provide a memorable customer experience that reinforces your competitive advantages and encourages repeat business.

  7. Monitor and adapt: Continuously monitor the effectiveness of your communication and delivery strategies, and make changes as needed to stay ahead of the competition.

By effectively communicating and delivering your competitive advantages, you can create a strong brand image, build customer loyalty, and differentiate yourself from your competitors.

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